1099-R J&S Distribution Code

[Guest lvegas]

Must a Code 4 (death) be used on Form 1099-R to report periodic annuity benefits to a surviving spouse? Or is Code 7 (Normal) more appropriate? The guide to the codes in the 1099-R instructions indicate the following for 4: use it regardless of the age of the employee/taxpayer to indicate payment to a decedent's beneficiary, including an estate or trust. But it also says to use Code 7 when no other code applies.

I think I have read somewhere that in J&S situations, the surviving spouse is to be treated the same as if he/she was the participant, meaning 7 might be more appropriate and I know of a number of plans that use this method.

It seems to me that either way, the IRS isn't going to care that much as neither code suggests the payments aren't taxable. I'm just wondering what's most appropriate.

[ERISAnut]

Never a 7 unless the spouse actually takes over ownership of the account and is no longer the beneficiary of the decedent with respect to the account. Hence, always a 4.

You are confusing apples and oranges. Assuming this is a qualified plan (and not an IRA) she will be treated as the "participant" with respect to her beneficiaries. Hence, distributions will be made with respect to her recalculated life expectancy each year (assuming this amount remains longer than her husbands life expectancy in the year of death minus 1 for each subsequent year). If she dies, the her life expectancy is used (minus 1 for each subsequent year) and compared to her beneficiary's life expectancy in the 1st year of distribution (minus 1 for each year).

To get to the bottom of your question without getting too technical, she is the beneficiary in all instances unless she rolls the account over to her own arrangement (thereby becoming the owner and no longer the beneficiary).